Easy Steps To Simplifying Small Business Accounting

Small business accounting is a time consuming task that doesn’t bring in
the reward of additional income. This is most likely what makes small business
accounting such a tedious task. If you look at the activities entrepreneurs
are most often behind on, it’s almost always recording and filing their small
business accounting paperwork. I’m not sure if balancing our books is so scary
because it seems really complicated or because we’re afraid of the bottom
line – but you can take the sting out of both with an organized recordkeeping
system.

Complementary Systems

Small business accounting should always be done using a computerized accounting
program to track income and expenses. This will not only get you through tax
time a lot easier, but will allow you to run more accurate projections and
reports about your financial situation. Despite this you still need a system
for organizing your small business accounting paper trail. The best possible
solution is one that mirrors your electronic system by the same chart of accounts,
the same categories, and the same accounting structure. Keep this in mind
as you set up each part of your small business accounting file system.

Tracking Income

Whether your customers pay you with a check or a credit card, it is a good
idea to keep a hard copy of the sales receipt and proof of the payment method.
I can’t tell you the number of times that one of my business clients had a
problem with a payment, and all it took was one little piece of paper to save
the day. If your bank accidentally deposits your check into someone else’s
account or credits the wrong amount to you, having a copy of the check will
help them correct the problem more quickly. If a customer disputes a charge
or claims that you processed a fraudulent purchase, your merchant account
may require a signed credit slip in order to rule in your favor. So print
out each order or service record and clip a copy of the check or charge slip
to it – then file either chronologically (by month) or alphabetically (by
the name of the customer). You’ll be glad you did if you need to refer back
to this information later.

Tracking Expenses

As I mentioned earlier, your expense files should mirror your company’s electronic
chart of accounts. However, you don’t have to get quite so detailed. The trick
is to set up more generalized filing categories, that allow you to group several
types of expenses together into one folder – for example:

marketing

office supplies

furniture and equipment

professional services

business administration

travel

professional development

Use whatever categories make sense to you, just remember that the goal is
for you to be able to easily find an expense record if you need to refer back
to it in the future. If that means organizing your bills by month so that
all of January’s paperwork is in one file and all of February’s is in another
– fine, as long as you can locate what you need down the road.

Tax Records

Another part of your small business accounting responsibilities will be to
file the notices and statements that relate directly to your taxes. The simplest
solution is to have a folder called “current taxes” in your file, as a catch-all
for collecting this paperwork. Then when tax time rolls around, you can hand
this folder and a disc with your small business accounting records on it to
your accountant – easy as pie. Of course, you’ll also want to have separate
files for storing previous years’ returns and supporting documents. Those
can go in your archive files, rather than your active filing system.

Saving Time Means Saving Money

Just taking a few minutes a month to organize your financial paperwork and
update your small business accounting files will save you hours or days come
April 15th. You will also have a clear idea of your bottom line,
be able to pay bills on time without late fees, know which customers owe you
money, and avoid any nasty financial surprises.